Mortgage market less than vigorous, lacks transparency: ACCC

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THE nation’s big four banks are part of home loan “accommodative oligopoly” that makes it extremely tough for borrowers to know if they are getting a good deal, the competition watchdog has found.

The Australian Competition and Consumer Commission, in an interim report into the mortgage market, said many consumers attracted to “basic” or “no-frills” mortgages could actually be paying higher interest rates than headline standard loans.

The inquiry, which looked at the big four and Macquarie Bank, found there was “less than vigorous competition” among the five when it came to mortgages.

A cash for loans bribery ring has been exposed on day one of the banking royal commission

A cash for loans bribery ring has been exposed on day one of the banking royal commission

ACCC chairman Rod Sims said consumers often faced opaque options which made it very difficult for them to get the best deal.

“We do not often see the big four banks vying to offer borrowers the lowest interest rates,” he said.

“Their pricing behaviour seems more accommodating and consistent with maintaining current positions.

“We have seen various references to not wanting to ‘lead the market down’, to have rates that are ‘mid-ranked’ and to ‘maintain orderly market conduct’.”

Mr Sims said the average discount on variable interest rate loans in the two years to the middle of last year was between 0.78 percentage points and 1.39 percentage points.

NAB staff allegedly took cash bribes to facilitate loans

NAB staff allegedly took cash bribes to facilitate loans

But consumers found it difficult to compare rates on offer from the big loan providers.

“The discounting by the big banks lacks transparency and it’s almost impossible for customers to obtain accurate interest rate comparisons without investing a great deal of time and effort. But the potential savings from these discounts are immense,” he said.

The report said there were signs of an “accommodative oligopoly” among the big four who cared little about the competition offered by smaller lenders.

The pricing strategies are often used to “accommodate, rather than challenge, rivals which has likely affected residential mortgage interest rates”.